21Druæboslovne razprave, XIX (2003), 42: 21-46
Andrej Rus UDK 316.468:316.354(73)
Interpersonal dynamics
in network organizations
ABSTRACT: Network organization is an organizational form that holds a big promise of
reaching organizational flexibility. It is often argued that by means of tearing down the
walls of bureaucratic authority organizations can promote organization-wide cooperation
and integration, essential features of competitive organizations in a changing
marketplace. In this paper we look at a simpler version of network organization i.e.
matrix organization in order to study interpersonal dynamics in an organization.
Specifically, we look at social networks and show that the patterns of relationships
predicted by the expectaions of theory of network organization does not emerge. Contrary
to expectations, we find the lack of lateral networks and strong vertical communication
with direct supervisors. The paper concludes by proposing a theory of status uncertainty
as an explanation for the failure of network organizations to eschew bureaucracy and
generate company wide integration and cooperation. The tearing down of bureaucracy
creates status uncertainty within organizations which leads actors to build protective
neworks recreating hierarchies in the process. The paper concludes with suggestion
that bureaucracy could be altered in many ways to accommodate flexibility. But flexibility
can not be achieved by tearing down bureaucracy.
KEY WORDS: network organization, matrix organization, social networks, interpersonal
dynamics
In the world where networks - social, organizational, computer - occupy preeminent
place in a number of disciplines and popular discourses it is difficult to imagine that
anyone would care about ‘old fashioned’ concepts such as matrix organization. After
all since the early 1980, with the appearance of Peters - Wasermann bestseller ‘In search
of excellence’, which criticized matrix organization as an overly structural approach to
integration an flexibility, the attention started to shift from structural to cultural
dimensions of organizations. Yet, the current discussions of network organization as an
emerging prototype for the organization of the future indicates that the same concerns
are being raised all over again (Powell 1990, Kanter 1991, Nohria and Eccless 1992a
1992b, Podolny 1998, Symon 2000). The key objectives that were once being solved
by a matrix organization – integration, flexibility, intrapreneurship, talent retention -
are now subsumed under the structural efforts to build a network organization. Integration
of functions and diverse expertise scattered throughout organizational hierarchy remains
a key objective of network organization. So is organizational flexibility measured as
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Andrej Rus
organizational capacity to respond to the changes in organizational environment. Lifting
the constraints on employees imposed by rigid hierarchy remains an issue with all
organizations that strive to retain talent. The key issues of network organizations are
almost identical to those that were addressed by matrix organization. What is new,
however, is technological environment. Matrix organization was proposed before the
advances in computing power and integration. But current solutions such as virtual
organization (Davidov and Malone 1992), network organization (Baker 1992),
boundaryless organization (Ashkenas 1995), horizontal organization (Ostroff 1999) and
a widespread and extensive use of project organization all contain close structural
similarities once typical for matrix organization.
In this paper we study interpersonal dynamics in a matrix organization in order to gain
a better understanding of what distinctive caharateristics of a network organization. Making
infrerence from matrix to network organization is justified on two grounds. First, network
organization is an overused but seriously underspecified concept that gives little guidance
to organizational analysis, let alone practice. Second, matrix organization remains the
most systematic and best thought through attempt to create a rudimentary network
organization and as such it lends itself to the systematic inquiry. This paper aims to explain
the dynamics of interpersonal relationships in a matrix organization in order to offer clues
for understanding the roadblocks in building a modern network organization.
1. The structure of matrix organization
The nature of the organizational environment has changed drastically in the last
thirty years. These changes have produced new challenges to the firms which now face
the new rules of competition (Hage, 1988). Swift technological development alone
makes all market opportunities short-lived which blurs the distinction between strategic
and short-term decision making. Environmental pressures give emphasis on flexibility
and adaptability and favor those who are organized for quick response and innovative
capability (Bahrami & Evans, 1987).
While organizational theory recognized the increasing importance of organi-
zational environments1  it simultaneously sought structural solutions to the problem of
adaptation and flexibility. The early 60’s saw the proliferation of dichotomous typologies
which sought to contrast the outlived “old” structures with the  promising “new” ones.
Barnes (1960) distinguished between closed and open systems. McGregor (1960)
introduced theory X and theory Y. Litwak (1961) referred to the same distinction as
bureaucratic vs. human relations organization. Burns and Stalker (1961) based their
research on the distinction between mechanic and organic systems of management.
Common to all these typologies was the perception that bureaucratic type of organization
was too rigid to meet the new challenges of rapidly changing environment. A new,
organic organization would have to allow for lateral rather than hierarchical flow of
information and authority, should replace supervision with coordination and power
sharing, and should base its integration on multi-group membership, network inter-
dependence, trust and confidence.
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Interpersonal dynamics in network organizations
Since the early 60’s organizations were experimenting with organizational structures
which allowed greater fluidity and permeability. These administrative innovations were
created initially to solve the complex problems of co-ordination and scheduling of large
defense projects. Implemented at first by NASA, Lockheed, and Boeing their combi-
nation of formal bureaucratic authority with project teams became known as matrix
organization. The literature began to emerge discussing these new developments (Argyris
1967, Davis, Lawrence, 1977, Cleland 1984, Galbraith, Kazanjian 1988).
The basic problem that these organizations faced was to integrate their activities
without reducing their high degree of differentiation (Galbraith, 1973). They needed to
maintain high levels of specialization due to the technical complexity of their tasks
while trying to solve the problem of integration of specialized functions. Lawrence and
Lorch (1967) noted that growing structural differentiation creates the need for closer
integration which can be solved by adding lateral integrating devices to the hierarchical
channels of control and coordination. Galbratih (1973:110) compiled a list of lateral
mechanisms ranging from the simplest informal direct contacts to more complex integra-
ting roles or departments and to the most complex and the costliest matrix design.
Organizations using the matrix design are characterized by the existence of two or
more separate hierarchies which intersect with one another. One is normally functional
hierarchy in which an organization is departmentalized along the lines of different
functions. The other is usually project oriented hierarchy with authority lines cutting
across different functional departments and linking all the personnel working on a single
project. Matrix organization is a result of the simultaneous overlay of the two hierarchies
producing a function-by-project grid.
From this structural arrangement there arise two important consequences which
give matrix organizations a characteristic stamp: dual authority relationships and power
sharing. Matrix programs develop dual authority relationships in which lower-level
managers report to multiple supervisors representing different hierarchies. In a function-
by-project matrix a lower-level manager (“two-boss manager”) is supervised by two
officials one representing the functional and the other the program hierarchy (Galbraith,
1973, Lawrence, Davis, 1977, Burns 1989). Dual report system creates a situation in
which a manager may have two supervisors (matrix managers) who in turn have to
share the same subordinates. Dual authority system was devised in order to make cross-
function, cross-group contact inevitable thus fostering coordination on the lower levels
of organization. More importantly, it was instrumental in redistribution of power in
which the new hierarchy had to gain a significant degree of influence from previously
exclusive domain of functional hierarchy in order to be able to coordinate activities
across different functions (Galbraith, 1973, Burns, 1989). When two matrix managers
are in command there has to be a measure of sharing of power between them. The two
hierarchies need to be balanced in their power in order to maintain the dynamic establis-
hed by the duality of matrix relationships.
In sum, matrix organization can be defined as an effort to supplement existing
functional departmentalization by additional hierarchy to create dual authority structure
with task oriented teams drawing members from various functional departments. It is
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Andrej Rus
an attempt to maintain functional bureaucratic organization but to develop it in a more
organic direction by changing the division of labor, type of control, and culture (Burns,
Stalker 1961). Matrix design is built on the assumption that if the pyramid is crisscrossed
by lateral and vertical channels of authority in addition to those of classical hierarchy
an organization will a) loosen otherwise stiff division of labor, b) substitute bureaucratic
command based on supervision with network control based on knowledge and
consultation, and c) create a culture of competence and commitment to broader organi-
zational goals instead of a culture of loyalty, obedience, and parochial, local know-
how.
Matrix organization is therefore an attempt to gain flexibility not by reducing but
rather by multiplying control mechanisms. This paradoxical effect echoes Simmel’s
argument of intersecting social circles in which he argues that multiple group membership
increases one’s choices and thereby one’s freedom to act (Simmel, 1964). Similarly,
intersecting lines of authority multiply obligations and dependencies but at the same
time create a broad range of structural opportunities for action and initiative. Middle
level managers who find themselves in such a situation are encouraged to participate
actively in the decision making and to develop entrepreneurial attitude toward their
work. Both academic and popular business press cheered the advent of matrix
organization for its assumed capability of reforming the organization culture favorable
to team entreprenurialism (Smith 1988), innovation (Kanter,1983) and consensus based
cooperation (Davis, Lawrence, 1977) thus bringing it closer to the ideal of an “organic”
system of management (Burns, Stalker, 1961).
2. From matrix to network organization
There are striking similarities between matrix organization with what is today known
as a network organization. The common theme is flexibility through integration.
Organizations seek flexibility without giving up traditional levers of control. They are
willing to experiment with various structural arrangements that hold a promise to
overcome the problem of segmetalism (Kanter 1983) and integrate thousands of emplo-
yees into an innovative, autonomous, problem solving team. While they both put a
strong emphasis on the self-organizing potential of interpersonal dynamics among the
people within an organization they differ strongly in their attitude toward formal
structures.
The key difference between matrix and network organization is in the way
organizational integration is engineered. While matrix organization is conceived in terms
of multiple hierarchies that create the space for bureaucratic entrepreneurship within
the system, the network organization is trying to eschew structure all together and sees
organization as a network of interactions rather than as a system of ordered positions.
The core intuition in network organization is that informal ties in a dense communication
network generate enough normative control so that they can substitute the formal
structures. This intuition builds on the experience of small professional organizations
that indeed often decouple formal from informal structures (Baker 1992). However,
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Interpersonal dynamics in network organizations
when it comes to larger organizations, the question of wholesale replication of informal
system leads organizations to seek structural solutions for integration. Organizations
do not attempt to turn themselves into network organizations. Instead, they aspire to
create a structural space for informal networks and create systems to exploit the creative
dynamics they tend to generate. The network organization is therefore just an added
dimension of resource allocation which is nested within the formal structure. Investment
banking is a good example of where network organizations have arrived to-day. They
are characterized by strong hierarchy with clear lines of responsibility and a clear bonus
structures. However, when deals are put together, the allocation of talent on a specific
project is driven by social networks (Eccles and Crane 1987).
Network organization and matrix organization share a common purpose but differ
in the way they approach the implementation. Since network organizations leave
implementation to informal dynamics of incumbent social networks it is hard to study
them beyond limited case studies. In this sense, matrix organizations offer a much better
research setting because they attempt to engineer integration with standard tools of
organizational design, that can be observed, analyzed and evaluated. In this paper we
look at matrix organizations in order to gain an understanding of structural problems
encountered by large organizations seeking to find flexibility through social integration
of people embedded in intraorganizational social networks.
3. Managerial networks in a matrix organization
While most of the literature deals extensively with the formal and technical aspect
of matrix design there is a surprising lack of attention paid to the ways in which patterns
of relationships are or should be affected by it. Although such implications are constantly
being made literature  offers only occasional remarks regarding the ways in which
personal networks are affected by the matrix design. It is nevertheless possible to discern
several recurring themes regarding the patterns, composition, and quality of the
relationships of the personal networks in matrix organizations.
Davis and Lawrence (1977) distinguished three levels at which matrix structures
have differential effects on their participants. The first one is the level of top managers,
the second one is the level of a matrix manager, and the third one is the level of a
manager at the bottom of matrix structure. Top managers who oversee the matrix are
least interesting for our concerns here. Their position reflects several new operational
concerns, notably the responsibility of balancing different arms of the matrix, but they
themselves do not enter directly in the matrix relationships.
The matrix managers represent the layer of managers who are fully involved in the
matrix relationships. Their networks are affected by the fact that they have to report to
two or more supervisors depending on the complexity of the matrix arrangement. In
addition, their common characteristics is that they have to share their subordinates with
other matrix managers. In a matrix where functional hierarchy is overlaid with a project-
business hierarchy the functional manager and the business manager need to share their
subordinates. This is a key characteristics of their position.
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Andrej Rus
The third level is the layer of two-boss managers. As they find themselves at the
bottom of the matrix structure, they need to report to two or more supervisors but they
do not share subordinates with their peers. The most interesting layers of managers are
therefore two-boss and matrix managers. They are the target of the matrix organization
and their networks should be therefore most affected by the matrix arrangement.
According to Davis and Lawrence (1977) matrix managers who are operating under
dual authority structure face very different situation than their colleagues in an ordinary
hierarchical organization which upholds the principle of unity of command. In contrast
to typical functional hierarchy where responsibility and decision making are solely the
purview of the functional manager matrix managers must share almost all decisions
with one another. Typically, functional manager will have to share many of his or her
decisions with business manager or other functional managers at his or her level. They
are faced with the unique job of influencing with limited formal authority. There are
two implications of this structural arrangement. The first is that the managers who have
to share the power cease to be the only source of authority. This affects their status and
relative importance of their position. The second is that the sharing of power creates
interdependencies which make it virtually impossible for a manager to do the work
without lateral coordination. The matrix managers are put in a situation where they
have to negotiate constantly with other managers about amount of workload, sequence
and scheduling of tasks, availability of resources and assignment of manpower.
Two boss managers are yet in another position. Having two bosses can be much
more demanding than being responsible to a single boss. Different bosses may and do
have different, often conflicting demands. By giving favor to one or another would
mean making a political statement since obedience to one would mean withdrawal of
obedience to another. In situation like this a two-boss manager is supposed to rise the
issue of incompatibility of demands and convene his or her two bosses in order to
reconcile the conflicting demands. This gives him/her a position of a broker especially
in a conflicting situation where parties in conflict try to influence each other through a
third party (Gargiulo, 1993). But even when the situation is not conflicting two-boss
managers retain a degree of influence which derives from the structural positioning in
a formal network of a matrix. It is this manager who is an interface, through which the
two distinct hierarchies meet. He or she is the focus of two separate concerns and it is
the burden of sharing the same subordinates which makes managers of functions and
projects cooperate with one another (Galbraith 1972, Davis, Lawrence 1977). The
implication of this structural position is further redistribution of power in favor of the
subordinate middle managers who can exert a significant influence on their superiors
and negotiate their obedience. Business literature likes to label this as “empowerment”
of the lower levels which allegedly creates conditions for internal entrepreneurship and
active participation (e.g. Kanter 1983, Smith 1988).
The hypotheses below summarize the ways in which personal networks of middle
level managers should reflect the basic characteristics of matrix organization. Since the
matrix supposedly changes the power structures and the patterns of relationships it is
less useful to try to find significant differences on isolated dimensions between matrix
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Interpersonal dynamics in network organizations
and non matrix organizations. Instead we should pay full attention to the patterns of
relationships and to the way in which they form into a system. The following hypotheses
try to spell out the basic features of matrix relationships in terms of prominence of the
core organizational ties. Since prominence reflects the power relationships it offers a
convenient way of conceptualizing the organizational relationships.
3.1 Hypothesis 1
The prominence of immediate supervisors in a matrix is comparable to the importance
of other hierarchical ties in an organization.
The ideal typical depiction of bureaucratic organization usually emphasizes that the
only legitimate channels of communication are the hierarchical channels of command.
The commands, rewards, and opportunities are flowing from the top down making the
hierarchical relationships of the utmost importance for any member of organization.
Given the fact that jurisdictional areas are strictly delimited, a direct supervisor is
ordinarily the only source of authority and hence, from the standpoint of a middle
manager, the most important contact in an organization.
Power sharing principle of matrix structure should affect the importance of supervisors
in a manager’s network.  Since the power is defined in terms of the extent to which
others can be forced to follow one’s command the amount of power is measured as the
extent to which those to whom the command is directed are willing to comply and
follow the orders. In a situation where there are multiple centers of power competing
among themselves for deference, hegemony of a single source of power over the others
is rendered obsolete. Instead, relative rather than absolute levels of power become
important. Thus, the power can be viewed as a degree of dominance in the relational
patterns and not simply as an attribute of a person or a position. Following this argument,
the patterns of relationships in the networks of middle managers should be affected by
the power sharing to the effect that the tie to their direct supervisor should loose its
exclusive centrality and become comparable to the importance of ties with other contacts
in the organization. A direct boss who in a functional hierarchy could be expected to be
the most important contact in the networks of his/her subordinate managers should in
the matrix context enjoy only a part of attention comparable to what is received by
others in the network. In particular his or her importance in the networks of middle
managers should approach the importance of the second boss as well as the importance
of the peer managers in the matrix.
3.2 Hypothesis 2
The pressure for lateral coordination and cooperation makes the ties with peer
managers and other lateral contacts as important as those with the contacts in the
hierarchical chain.
A defining feature of a matrix organization is the presence of other matrix managers
in a managerial network with whom a manager has to share subordinates, resources,
information and plans. According to the matrix theory lateral ties in general and the ties
with other matrix managers in particular should be as important as the direct supervisory
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Andrej Rus
ties. Since the presence of lateral ties doesn’t convey much information about the extent
and dynamics of lateral interaction we need to focus on the extent to which these ties
are employed and utilized. If the matrix theory is right than the pressures for lateral
cooperation and coordination should make lateral contacts important in the personal
networks of a middle manager.
3.3 Hypothesis 3
The strategic positioning of the subordinates as brokers between two bosses should
earn them a place in the networks of their immediate bosses as the contacts with a
significant (non-zero) importance.
Similar to the argument described above, the influence of a subordinate should be
reflected in the network of his or her supervisors. Since the supervisors depend to a
significant degree on the capacity of their subordinates to integrate various demands
originating from different hierarchies their critical role should earn them a degree of
influence over their supervisors. Again, since the subordinates constitute a part of the
formal network of their supervisors it is not the presence but the degree of utilization of
a tie with a subordinate which is of our concern. Therefore, we look at the relative
importance of subordinates in the networks of their bosses in comparison with
supervisory and lateral ties. The importance of subordinates will of course not equal the
importance of other ties in a managerial network but should be considered important
enough to constitute an integral part of a managerial network.
3.4 Hypothesis 4
In matrix organizations conflicts tend to be integrative, i.e. they tend to occur most
often between the manager and the most prominent contacts in his/her networks.
Numerous authors have noted that the principle of power sharing in a matrix firm
induces a degree of competition and conflict among middle managers (Burns, Stalker,
1961, Argyris, 1967, Davis, Lawrence, 1977). However, conflicts do not always have
detrimental effect on integration. Blau (1977, 1984) actually argued that the frequency
of conflicts increases with the frequency of contacts, but as long as these conflicts are
dispersed rather than consolidated they do not inhibit integration. Multiple command
structure of matrix organization is designed to increase mutual interdependencies among
middle managers forcing them to coordinate their activities among themselves. As the
amount of interaction increases the conflicts become more frequent. But at the same
time conflicts have to be resolved as they occur since the work in a matrix can not be
done in isolation which is what should prevent avoidance of conflicting relationships
and their segregation in an organization. We therefore expect that the managers should
be in conflict with those with whom they are in the most intensive relationships, i.e.
with their most central contacts. The reverse would indicate that they tend to avoid
conflicting relationships and try to isolate their networks from them what may eventually
lead to segregation of ties and inhibit integration.
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Interpersonal dynamics in network organizations
3.5 Hypothesis 5
The middle managers maintain short-term relationships in their networks and are
weakly committed to them.
Matrix organization represents an attempt at making an organization more flexible
by opening up possibilities for the managers to create their own support structures in
addition to their formal relationships. It is argued that active networking should help
the managers to fulfill their tasks more effectively by better utilization of organizational
resources. These pressures for utilization of lateral ties create incentives for commitment
to the organizational goals rather than local concerns and encourage middle managers
to persist in their relationships within the firm only as long as they have a direct bearing
on their work. As the tasks, problems, and opportunities change over time they can
switch from old to the new relationships whenever they find it useful to do so. Avoidance
of any firm, long-term commitments in their relationships should be reflected in a
tendency of their relationships to be predominantly short-term.
3.6 Hypothesis 6
Opportunities for contacts cut across the formal positions in an organization and
are dispersed equally among them.
This hypothesis summarizes one of the basic advantages that a matrix form is
expected to have over bureaucratic structure, namely it should overcome the problem
of segmentation of bureaucratic functions in the self contained entities (Kanter, 1983)
and provide a basis for organization-wide integration. Lateral ties are those which are
supposed to evolve into a prime coordinating mechanism and the matrix structure is
expected to facilitate this process (Galbraith 1973, Mintzberg 1979). It is expected that
the matrix structure lifts the barriers to organization-wide communication and improves
the opportunities for contacts with any position in an organization. Unlike the
bureaucratic structure which channels the interaction and communication in the vertical
lines, matrix is expected to direct them in both hierarchical and lateral channels thereby
improving opportunities for contacts with all positions in an organization. In particular,
the opportunities for lateral engagement should become equal to the opportunities of
vertical exchange.
The first three hypotheses are not independent among themselves. Together they
describe a pattern of relationships that a matrix organization is expected to configure in
a personal network of a middle manager. An overwhelming characteristics of the expected
pattern of relationships is a general leveling of power and influence in the matrix structure.
The power pertaining to a formal position is expected to be leveled off by the leverage
that the matrix managers can apply themselves or expect from others in a matrix
organization. The general leveling of power should have the effect described by the last
three hypotheses. The opportunities of contacts should extend beyond functional
hierarchy. This increase should induce more conflicts which should not turn into long
term feuds and disintegrative warfare since the high levels of interdependence and the
short term commitments does not encourage it.
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Andrej Rus
4. The Data
The data come from a research project which had a different purpose from the one
we pursue in this paper - that of assessing the effect of the network efficiency of middle
managers on the pace of their promotion (Burt 1992). The research focused on the
middle managers in one of the largest American high technology manufacturers (which
can not be named). In the fall of 1989 the firm employed more than 100,000 people
with 3,303 middle managers defined as those who were occupying four managerial
ranks below the rank of the vice-president. A stratified sample included 547 managers
out of which more than one half returned the questionnaires that were mailed to them.
The response rate was high compared to other sociometric research and in addition
there were no non-response biases. High quality of the data however does not preclude
the conceptual problems that usually face any secondary data analysis problem.
The company took pride in staying innovative not only in their products but also in
their organizational structure. The matrix management has been introduced more than
fifteen years ago which means that the organizational routines have been well established
by the time the research was conducted. The company was frequently described and
hailed as a successful implementation of this complex organizational design. The matrix
arrangement was evident from the formal positions/roles of alters in a typical managerial
network. In addition to the classical hierarchical relationships with direct supervisors
and subordinates the networks included also the ties to matrix bosses representing the
second dimension of a matrix hierarchy and the ties with other matrix managers with
whom the managers have to coordinate his/her work. The contacts which lacked any
formal role within the organization are referred to as informal relationships. Table 1
summarizes the distribution of the 3015 ties named by 284 managers, generated by
nine name generator items according to the formal position of alters. An average
managerial network included one supervisor, one matrix boss, one subordinate2 , three
matrix managers and five informal contacts.
Table 1: Distribution of ties by formal position of alters
The organizational position of the alters to which an ego had ties is the key
independent variable. The dependent variable is built around the concept of importance
i.e. prominence of ties. We operationalize the prominence of ties in terms of its
 Position of alter count %
 Hierarchical dimension
 Direct Boss 279 9.3
 Matrix Boss 318 10.5
 Subordinate 201 6.7
 Lateral Dimension
 Matrix manager 870 28.9
 Informal contact 1347 44.7
 Total n of ties 3015 100
 N of managers = 285
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Interpersonal dynamics in network organizations
multiplexity or multistrandedness: the higher the number of different contexts in which
a tie is activated the more prominent the tie (Minor, 1983 for brief discussion of the
concept and its use).
Network analysts have given the multiplexity different interpretations depending
on their research agenda. Those who studied the networks in new urban communities
were concerned with personal networks as the sources of social support. They interpreted
multiplexity as a sign of an intimate relationships with high stability and durability.
They argued that a multiplex tie is hard to break since the failure in one context of
exchange would not break the tie. Empirical results corroborated this theory. Multiplexity
was found to be positively associated with closeness and intimacy of relationships which
was considered to have a positive contribution to viability of personal communities and
support networks in the fragile modern environments (Fisher,1982, Wellman, Carrington,
Hall 1988). By focusing on social support this research limited itself on intimate personal
communities based on symmetrical relationships, mutuality, and high levels of trust.
Organizational realities are a distant departure from the world of personal communities.
They are systems of power and control marked by inequality of status and rewards. The
approach which derives from the theory of power based on exchange theory seems much
more appropriate for organizational analysis (Blau, 1964). For the exchange theory the
key feature of a relationship is the direction of the exchange which determines who has
power over whom. According to Emerson (1976) power is a function of dependence.
Cook (1982) argues that exchange networks should be viewed as structures of resource
dependencies among sets of actors. According to this theory, a manager who is activating
the same tie in multiple exchange contexts is seen as lacking alternatives and being
dependent on a single tie for multiple resources. Thus, multiplexity relates directly to the
dependence of a manager on a particular tie. From a point of view of a dependent manager
a multiplex tie signals the dependence on a certain exchange partner. The higher the
degree of resource dependence on a particular tie the more often a dependent manager
would cite a given contact and the higher the degree of multiplexity of such a relationship.
The prominence of tie is calculated as a sum of the citations of a particular alter
across four different contexts. The four contexts were invoked by four questions asking
about 1) with whom one confides, 2) who is a source of valuable advice, 3) who is the
buy-in person, and 4) who could be consulted about the change of the job. If a person
was cited on all of the four questions he/or she got the score 4, if a person has not been
cited on any of these four the score was 0.
5. Results
To establish relative importance of ties to different positions we look first at the
table 2. It presents the distribution of the answers to the question: “Of all the people you
know in the firm, who do you see as your single most important contact for your continued
success within the firm?”. The results clearly show that the most important contacts are
chosen predominately among direct supervisors and, to a lesser degree, among matrix
bosses. All other positions seem to be less important to the managers. This result refers
32 Druæboslovne razprave, XIX (2003), 42: 21-46
Andrej Rus
only to a single most important contact. While the result is telling, the question itself is
limiting. However it sets a comparison for our next table and serves as a check of
external validity of the concept of prominence.
Table 2: The most important contact by position
To derive a more comprehensive measure of importance we calculated a measure of
prominence based on multiplexity as described above. The table 3 presents joint distri-
bution of ties according to their position and multiplexity. First, we look at the relative
prominence of direct supervisors. The results seem to be congruent with those from the
table 2. The ties with direct bosses tend to be disproportionally more complex than the
ties with any other position within the firm. This similarity provides justification for
our decision to use complexity as a measure of importance of the ties with a particular
position.
On the substantive grounds the result contradicts the hypothesis that the prominence
of a direct supervisor should be comparable to that of other positions in the matrix. The
result does not show only a minor discrepancy between the data and theory. The
importance of supervisors is incomparably higher than of any other position strongly
disproving the hypothesis. According to matrix theory the power of the direct supervisors
should be shared with the matrix bosses resulting in equal importance of both positions.
The results are far off from what the theory would expect. The matrix bosses are not
nearly as important as the direct supervisors.
 The position of alter         The most important contact
Yes No
 Direct Boss 106 173
(17.1)
 Matrix Boss 62 256
(6.5)
 Subordinate 1 200
(-4.5)
 Matrix manager 54 816
(-3.9)
 Informal contact 62 1285
(-8.2)
 n of managers 285
Note: The distribution of answers to the question: Of all the people
you know in the firm who do you see as your single most important
contact for your continued success within the firm? The figures in
brackets are adjusted standardized residuals obtained from a table
of the positions by the question (Y/N). The high positive value
indicates that the frequency highly exceeds the expected while a
large negative one indicates that the frequency is much less than the
expected one. Standardization of the residuals make them
comparable among themselves. Since residuals are symmetric they
are reported only for ‘yes’ column. The residuals in ‘no’ column are
the same with the opposite sign.
33Druæboslovne razprave, XIX (2003), 42: 21-46
Interpersonal dynamics in network organizations
Table 3: The prominence of ties by position of the tie
Significant differences in mean prominence between positions:a
                     a significance level at p<.05
Similarly, the lateral ties seem to be under utilized and hence, less important than
the ties with direct supervisors. In fact, the matrix bosses have a slight tendency of
being consulted in one or two different contexts. But relatively speaking they are not
nearly as important as the direct bosses. They are consulted primarily in two contexts
i.e. as general confidant ties or/and as a source of buy-in support. The contacts that are
named as essential sources of buy-in for initiatives that a manager can propose are
those who can significantly affect the success of an initiative. They are usually the
members of different groups who would need to commit their resources to a proposed
project and who can therefore block an initiative. In short, they are those who need to
be consulted in order to minimize the chance that they will apply their negative power
and block a proposed project. Low complexity of matrix bosses seems to indicate that
the contacts are far from cooperative. They seem to be maintained primarily as a result
of functional exigencies that a matrix imposes on managers but they do not have the
importance comparable to that of the direct supervisors. But apart from this, they tend
not to be utilized for any other purpose. Their prominence is therefore much more
limited than expected by the theory. The lateral ties which should evolve in a cooperative
and integrative system seem to be used only selectively for limited purposes only. We
1 2 3 4 5
 1 Direct boss
 2 Matrix boss *
 3 Subordinate * *
 4 Matrix manager * * *
 5 Informal contact * * *
 Prominence Direct Boss Matrix Boss Subordinate Matrix manager Informal contact
 0 35 57 112 78 236
(-2.1) (.4) (15.0) (-7.6) (.4)
 1 68 175 59 465 783
(-9.5) (1.3) (-6.5) (1.5) (6.6)
 2 70 55 19 202 213
(3.0) (-.6) (-3.4) (4.2) (-3.5)
 3 61 21 10 95 104
(7.3) (-2.0) (-2.3) (1.5) (-3.2)
 4 44 10 1 28 9
(13.0) (.1) (-2.2) (.3) (-6.8)
 Total 278 318 201 868 1345
 Mean
 prominence 2.04 1.22 .65 1.46 1.16
 N=3010;
(For figures in brackets see Notes bellow the Table 2).
34 Druæboslovne razprave, XIX (2003), 42: 21-46
Andrej Rus
suspect that even this has to do more with the elimination of the threat than with any
serious attempt at building cooperative ties. Had the managers pursued laterlal ties with
the aim to establish organization wide cooperation, the prominence of lateral ties would
have been equal or greater to the prominence of direct supervisors.
Informal contacts are noninstitutional part of lateral networks. They are the contacts
that are not identified as occupants of any formal role but who are explicitly named as
active contacts. Their prominence or rather their lack of prominence is evident from the
table 3. They tend to enter the network as either extremely valuable contacts in the past
or as the most frustrating ties. Matrix theory expected lateral ties to carry similar or
even greater importance than the supervisory relationships. In particular, it is argued
that the matrix form should enable networking to go beyond formal positions in order
to exploit the potential scattered around an organization. But no such evidence is found
here. On the contrary, we find that the prominence of direct supervisors is unparalleled
and that the prominence of the lateral ties does not even approach it. If formal lateral
contacts (i.e. matrix bosses) bear a small degree of prominence the informal ones are
even less prominent.
The results regarding the prominence of subordinates also contradict the expectations
of the theory. Namely, the prominence of the subordinates tend to be nil compared to all
other ties. This result is surprising for two reasons. First, the question asked to name
only the most promising and successful subordinate. This made the managers name
only their favorite subordinate whom they respect and one would expect that they would
have at least some importance for their supervisor. Second, the structural position of
interface in dual authority system should give them some leverage and resulting
prominence. Instead the subordinates entered the managerial network by virtue of the
way in which the questionnaire was structured and not by virtue of their at least marginal
importance. If we try to speculate about these results we are tempted to portray managers
as distinguishing among the subordinate managers who are threatening to his/her position
and those who are not. Those whose ability might compete and eventually jeopardize
their bosses authority may be perceived as able but not as the most favorite subordinates.
It should not come as a surprise if the managers would tend to name only the non-threatening
subordinates as their favorite contacts who would understandably, have no importance in
their networks. But we have no empirical evidence that this may indeed be so.
Overall pattern of networks of middle managers reveals the following picture:
managers are heavily involved with their direct supervisors while they pay little attention
to their matrix bosses. They utilize their lateral ties only for special occasions related to
their immediate task and they seem to avoid the opportunities to expanding them in the
direction of extensive cooperation. Their prominence seems to be deriving from the
formal position i.e. from the fact that they need to be consulted. When this formal
constraint is not present the prominence is even lower, as the comparison between the
formal and informal lateral ties amply demonstrates. Adding to the picture is a complete
absence of any importance of the subordinate managers.
Overall pattern of relationships is therefore quite different from the predictions of
the theory. The last line in the table 3 reports the mean complexity of each position.
35Druæboslovne razprave, XIX (2003), 42: 21-46
Interpersonal dynamics in network organizations
While the measure of prominence is admittedly crude, the results nevertheless add to
the description of the general network pattern. By far the most important are direct
bosses with the mean complexity 2.04 followed distantly by laterally located matrix
managers (1.46). Matrix bosses and informal contacts have the same mean complexity
(1.22 and 1.16 respectively) while the importance of subordinates lags well behind
(.65). All the groups differ significantly among themselves with the exception of matrix
bosses and informal ties. Again, the line of direct supervision is the one which carries
the most of the importance in the networks of middle managers.
According to theory, management of conflict and its integration in the everyday
organizational routines should be facilitated by the matrix organization. We located the
conflict by asking the managers: “who has made it the most difficult for you to carry
out your job responsibilities?”. The distribution of answers across formal positions in
the table 4a reveals only that the conflict is dispersed with regards to organizational
roles. There is a slight tendency for a conflict to occur with informal ties more often
than with others but it is not enough to base firm conclusions. More telling is the
relationship between the importance of a tie and a conflict. Table 4b shows that this
relationship is negative; the conflict is predominantly limited to those with whom one
has no relationship. This contradicts the expectations of the matrix theory which assumed
that the conflict would occur as a result of extensive exchange. Successful resolution of
conflict would imply that the conflict would not terminate or limit utilization of a tie.
Instead they should both occur together; the more prominent the tie the higher the
probability of conflict. The results show just the opposite. The conflicting ties are
excluded from the exchange and segregated by the avoidance. Thus, the conflict seems
to be poorly integrated into the organizational routines.
Table 4a: Obstructive contacts by position
 The position of alter          The most obstructive contact
Yes No
 Direct Boss 30 249
(1.3)
 Matrix Boss 32 286
(.9)
 Subordinate 0 201
(-4.5)
 Matrix manager 61 809
(-2.1)
 Informal contact 140 1207
(2.9)
 n of managers 285
 Total n of ties 3015
Note: Crosstabulation of answers to the question: Who among the
people in the firm has made it the most difficult for you to carry out
your job responsibilities? (For figures in brackets see Note bellow the
Table 2).
36 Druæboslovne razprave, XIX (2003), 42: 21-46
Andrej Rus
Table 4b: Obstructive contact by prominence
Table 5 presents the evidence about the duration of ties in a matrix. Short term
relationships and weak commitments are considered to be almost definitional
characteristics of matrix: “we are dealing with temporary, cross-functional task groups
operating within a framework of permanent functional departments and intersecting
lines of project authority” (Baber, Bartlett, Dennis, 1990: 248). Shifting task groups
make numerous ties transient. The results show a general tendency of duration of tie to
be negatively associated to the frequency of contact: the longer one knows his/her contact
the less frequent they see each other. While the difference between the ties which are
maintained either on the daily or on the weekly basis do not differ significantly the ties
which are enacted monthly or less than monthly have significantly longer duration than
the more frequent ties.
Table 5: Duration of tiesa by frequency of contact
                                                a Duration of ties is measured by how long a respondent has known the alter.
The way in which opportunities for contacts are distributed among the positions in
the organization is evident from the table 6. The closest indicator of contact opportunity
in the data is the frequency of contacts. Although an unconventional measure for the
concept of our concern, frequency of contacts do reflect opportunities for contacts.
Frequency of contacts are the result of choice which is structured by organizational
rules and norms and can thus be regarded as indicating contact opportunities within an
 Prominence             The most obstructive contact
Yes No
   0 189 329
(24.7)
   1 54 1496
(-10.5)
   2 11 548
(-6.3)
   3 6 285
(-4.2)
   4 2 90
(-2.3)
 n of managers 285
 Total n of ties 3010
Mean 1 2 3 4
  1 Daily 5.76
  2 Weekly 5.70
  3 Monthly 6.80 * *
  4 Less often 8.09 * * *
Note: Crosstabulation of answers to the question: Who
among the people in the firm has made it the most difficult
for you to carry out your job responsibilities? (For figures
in brackets see Note bellow the Table 2).
37Druæboslovne razprave, XIX (2003), 42: 21-46
Interpersonal dynamics in network organizations
organization. The most frequent contacts occur along the narrow lines of bureaucratic
hierarchy. The most frequent contacts are maintained with subordinates. Majority of
them are maintained on a daily basis. This is not a surprising finding by itself since the
supervision of the subordinates is one of the basic tasks of the managerial position. But
combined with the fact that the subordinates are also the least important contacts gives
the findings at first sight a paradoxical character. But the inconsistency is an important
indication of the fact that the measures of importance and frequency are independent
from one another describing different phenomena. On more substantive grounds, it
means that dependency relations do not evolve around the most frequently used ties but
rather around those formal positions that are vested with significant organizational
resources.
Table 6: Frequencies of ties by different positions
The other two hierarchical ties, the ones with direct supervisors and matrix bosses
are maintained daily or weekly although to a lesser degree than those with the
subordinates. As we move to the lateral dimension the ties become less frequent. The
ties with matrix managers are either weekly or monthly while those with informal
contacts tend to occur less often than on a monthly basis. This table fails to provide the
support for the hypothesis that the opportunities for contacts should be dispersed among
all organizational roles and positions. On the contrary the data indicate that the contact
opportunities are structured around hierarchical rather than lateral positions thus defying
one of the most important expectations about the integrative capacities of the matrix
form.
To summarize, only one of the six hypotheses has been substantiated by the data.
The expected redistribution of power and corresponding equalization of the importance
of organizational positions/roles was not documented. Neither we found evidence of
the integration of conflict into organizational routines or a dispersed pattern of the
opportunities for contacts. The only finding which seems to be in congruence with the
predictions of the matrix theory is the indication of a tendency of contacts to be of short
rather than long duration. The results clearly refute the theory and demand another
explanation which is attempted in the next section.
 Note: missing 189 cases; (For figures in brackets see Notes bellow the Table 2).
 Frequency of a tie Direct Boss Matrix Boss Subordinate Matrix manager Informal contact
 daily 106 111 131 199 126
(6.5) (5.8) (15.4) (.4) (-15.4)
 weekly 116 71 48 270 251
(6.6) (-1.2) (-.3) (4.8) (-7.3)
 monthly 36 53 7 238 334
(-4.0) (-2.5) (-6.6) (4.4) (3.3)
 less often 7 63 1 111 547
(-9.1) (-1.9) (-8.2) (-9.5) (19.2)
 Total 265 298 187 818 1285
 N=2826
38 Druæboslovne razprave, XIX (2003), 42: 21-46
Andrej Rus
6. Discussion: Dependency without Patronage
Recent research has put the merits of matrix organization in question. Burns (1989)
who investigated various structural features of matrix organizations in 315 hospitals could
not find any structural determinants of matrix complexity, stability of form, and its survival.
Barber, Bartlett, and Dennis (1990) compared staff and matrix members of four federal
agencies finding no evidence that the matrix type outperforms bureaucracy with respect
to utilization of resources, external support, effectiveness of communication, independence
and autonomy, and morale. Brimm and Kadushin (1990) described managerial networks
in a multinational company emphasizing damaging ‘neurotic effects’ of “shadow
networks”. The fact that the matrix form was not related to the firm’s environment, that it
consistently failed to produce the outcomes it was supposed to produce while at the same
time remaining stable and enjoying remarkable survival led the researchers to conclude
that matrix management is a political project, a structural myth rather than a technical,
managerial concept (Mayer Rowan 1977). The persistence of matrix form was associated
more with institutional and political support than with any technical reason.
This research provided evidence to the effect that matrix organization tends to
generate more promises than it can actually deliver. But it did not provide any theoretical
explanation as to why the observed patterns emerge instead of the expected ones. Brimm
and Kadushin (1990) suggested that it may be the faulty implementation or inadequate
organizational culture. Burns (1989) and Barber, Bartlett, Dennis (1990) went further
and questioned the capacity of matrix structures to produce the desirable effects but
were limited by their data.
Our data let us view an organization as an open natural system by allowing us to
observe actual patterns of relationships within the matrix organization (Scott, 1987).
Based on our findings we would like to develop the following theoretical argument. We
argue that organizations by adopting matrix structures switch from hierarchical to market
governance while maintaining hierarchical structures of authority. This creates a situation
in which status is decoupled from position. The result is an incongruity between
responsibility and formal authority that creates high positional uncertainty and
competition without backing of the informal social structures. This can explain the
observed network patterns that indicate that resource dependence strategies of
participants favor strengthening the ties with direct bosses to developing lateral contacts.
What organization theorists usually emphasize is the fact that the source of
organizational rigidity is in rigid rules and structures which constrain actions of its
members. They have to adhere closely to predefined patterns of behavior and the more
rigidly defined the roles the lower the freedom to act according to the demands of the
situation. This limits the capacities of individuals at their role performance and decreases
the adaptability of an organization. Thus Davis and Lawrence (1977) concluded that
flexibility of an organization comes from flexibility in the roles of its members. It seemed
to follow that the loosening of the rules and prescriptions for role behavior an organization
can better utilize the capacity of individuals to adapt themselves to the situation and act
according to their best judgment of what is the most appropriate response to the arising
39Druæboslovne razprave, XIX (2003), 42: 21-46
Interpersonal dynamics in network organizations
problem or opportunity. This idea guided the reformers to suggest various ways of
loosening up the hierarchical managerial structures and a matrix management takes a
prominent place among such attempts.
It is often overlooked that the loosening of the formal structure is not simply a
matter of degree of formal prescription. The rules which define the roles can be more or
less narrow and prescriptive. But there is a basic discontinuity underlying these changes.
As organization move toward more flexible structural arrangements they shift from
one type of governance to another. This discontinuity is conceptualized in Williamson’s
(1975, 1985) distinction between markets and hierarchies as the two polar types of
governance structures. Unified governance refers to the bureaucratic hierarchy in which
the exchange relations are incorporated into the hierarchical structure and determined
by the rules and the flow of authority. Market governance in turn refers to the absence
of any vertical authority and the exchange relationships are determined by the partners
to the exchange. The attempts to loosen the formal structure are therefore driven by the
implicit assumption that the governance structure in an organization should move from
a hierarchical to the market basis. A degree of such internal marketization, it is believed,
could make an organization more dynamic by introducing competition, uncertainty and
opportunity in the roles of its members.
Bureaucracy is organized around the iron rule of correspondence between position
and status. This correspondence is so strong that they seem to be interchangeable within
the bureaucratic domain. Position is defined in terms of the functional role the incumbent
is expected to play. Status reflects the relative standing in the social system as contrasted
to the functional one. Power, prestige, and income are its notorious dimensions. But in
hierarchical structures all three status dimensions increase monotonously with positions.
Thus the functional order is projected in the social one. Social system is stratified along
the lines of the technical-functional one which guarantees the correspondence between
status and position.
In matrix organization status is decoupled from position. Dual authority system
with the sharing of subordinates and multiple supervisors creates a situation in which
the formal position has no definite sanction of status leaving it open for the individuals
to bargain for power, compete for prestige, and lobby for their income and promotion.
This duality of position and status looks as if one would try to combine the characteristics
of Stinchcombe’s (1959) contrasting  bureaucratic and craft organization into one:
bureaucratic permanent appointment is combined with craft’s temporal assignment to
the project; payment in the form of salary by position typical of bureaucracy is adjusted
for performance in competitive comparisons with others; career is structured by
administrative regulation but both the status and promotion are left to be determined by
a form of structured competitive internal labor market. When bureaucratic rules are
replaced by a degree of market competition the status of the individual occupying a
particular position is determined through competition rather than through position. These
loosely defined positions infuse additional uncertainty into the role of a manager who
is left wandering what is expected of him, what he should be doing, and who is
apprehensive about what others are doing (Burns, Stalker 1961).
40 Druæboslovne razprave, XIX (2003), 42: 21-46
Andrej Rus
It is rarely noted that the redistribution of power in matrix is only informal. By
decoupling position from status, matrix organizations do not redistribute power within
organization but rather open new possibilities of access to power sources. By saying
that a given position has no definite amount of authority organizations introduce a
market on which the power needs to be traded and gained. Since the positions entail
clear responsibilities but is vested with little formal authority over people and resources
occupants need to rely on informal processes. Kanter (1983) gives a rich description of
the ways in which the power and resources are solicited by middle level managers in
order to complete their projects and do their work. The prevailing impression from
various descriptions is that decoupling results in the shifting of the emphasis from formal
authority to informal leverage. Since power is not vested in position it needs to be
gained through the interpersonal processes.
The emphasis of matrix organization on interpersonal processes which become a
core medium of organizational processes has a profound effect on informal organizational
structure. Literature defines informal structure as the one which develops in addition to
the formal one. Blau (1955) has described how informal structures like cohesion and
status differentiation develop among formally equal peers. This social system evolved
as a result of cooperation and actually stabilized the flow of help advice and consultation
among colleagues. It is important to note that it was the abstract framework of formal
equality of positions which facilitated the formation of informal structure in which
cooperative exchange was embedded. Bureaucratic rules and rigid structures have merit
in stabilizing the patterns of relationships. They increase repeated opportunities for
contacts and enhance the chances of development of a social system by limiting these
interactions in time and space (Blau, 1977). When organizations move from bureaucratic
rules based structures to more flexible, matrix ones, market structures do not replace
formal structures but rather the informal ones.  They are devised to replace social control
with the market governance. Marketization helps reduce all the perils of bureaucracy.
The patterns of relationships are made unstable thus preventing the formation of
particularistic solidarities and local alliances. Through this process the informal structure
and the solidarity based on it is weakened and gradually driven out. But with the informal
organization wiped out and substituted with market structure the grounds for traditional
cooperation are eliminated. Bureaucratic opportunism is traded for opportunism of market
behavior with the hope that flexibility will offset the increase in transaction costs.
In sum, the matrix organization is designed to loosen formal authority structure in
order to inject a measure of market behavior such as competition and entrepreneurship
into the organizational culture. It does that by multiple command structures and
consequent decoupling of positions and status. The patterns of relationship cease to rest
on the formally defined positions around which the culture of cooperation and the
stratified system of informal ties would develop. The social system and the controls
built in it are replaced by market controls whose volatility does not provide any basis
for solidarity and cooperation. Thus the matrix organization gains high flexibility of
patterns of relationships, high volatility of political ties and coalitions which prevent
them to turn an organization into a field of entrenched interests. But at the same time it
41Druæboslovne razprave, XIX (2003), 42: 21-46
Interpersonal dynamics in network organizations
has to sacrifice its traditional sources of solidarity and cooperation. This indeed makes
an organization more flexible. The lack of departmental entrenchment and social
organization which too often serves for defensive purposes of a particular group or
department makes any kind of ties equally possible. With the highly mobile and ever
changing patterns of relationships the accessibility of the individuals from different
groups is highly increased and facilitated. This freedom which derives from the lack of
social structuring allows participants to enter into relationships with others from
anywhere within the firm and at the same time it allows them to terminate them as soon
as their utility diminishes.
With this view of matrix organization we can better understand the earlier research
on the effects of matrix management and try to explain our findings. Earlier research
based on case studies focused primarily on psychological effects of matrix management
and consistently found that the system induced high levels of status anxiety among
affected managers (Burns, Stalker, 1961, Argyris 1967, Galbraith 1973, Davis and
Lawrence 1977, Brim and Kadushin 1990). However, it was believed that the
psychological strains resulted from poor adaptation to the new, more dynamic system:
status anxiety was supposedly experienced by those who were not able to cope with the
increased level of uncertainty. Thus these findings never received appropriate attention
and were considered to represent “matrix pathologies”.
Our data do not speak of any psychological experiences but they clearly indicate
that so called “pathologies” are so wide spread that they need to be taken as “normal”.
We found that middle managers defied the theory by forming the networks dominated
by their immediate supervisor instead of exploiting dual authority system and relying
extensively on their lateral ties. Their fixation on their bosses was met by complete
ignorance from the other side. Their bosses did not maintain any consulting relationship
with them. Instead they too, were occupied by nurturing complex relationships with
their own direct supervisors. In short, we found that it was the direct boss who tended to
dominate in a typical network of a middle manager. Lateral and matrix relationships
bore much lower importance.
These network patterns clearly showed that they were not the result of an isolated
desperate attempt of an incapable manager but rather a general tendency of middle
managers to cope with the uncertainty of their positions about which we spoke above.
They seemed to be using a resource dependence strategy in an effort to offset the highly
uncertain nature of their position. Resource dependency theory suggests that the
dependent actor will seek to mitigate the power of the dominant party by coopting the
tie rather than resisting it. It will try to embed its dependency relationship in a larger
context of exchange and thus create some limits to the legitimate use of power (Pfeffer,
Salancik, 1978). Managers in the matrix structure face slightly different problem. Their
environment is not structured enough to allow them to identify dependency relationships
easily. Instead they are placed in a highly unstructured world in which they are pressured
to perform but which lacks any clear signs of constraint, dependency, and orderliness.
They are presented with two different possibilities for action. They can either
entreprenurially embrace the uncertainty, take risks, and exploit the opportunities that
42 Druæboslovne razprave, XIX (2003), 42: 21-46
Andrej Rus
the unstructured space has to offer. Or, they can run for cover, so to speak, and intensively
try to build protective networks. The theory assumes that the entrepreneurial response
is natural. Our analysis suggests the opposite, i.e. that the managers adopt the defensive
strategy. And there seem to be good reasons for that. Since the matrix firm bases its
solidarity and integration on market-like principles of free involvement and exchange
the informal structure lacks the traditional grounds to develop in a strong support network.
The flexibility of the organization depends on the flexibility of relationships among the
members in the firm resulting in feeble networks involving short term ties with weak
commitments. Moreover, the same principle which encourages the managers not to
commit too much to a particular tie makes them avoid those with whom they have
conflicting relationships causing the conflicts to remain unresolved and segregated in
remote places in an organization. In addition, the general reluctance to get involved in
any kind of lateral relationships results in a peculiar pattern of association where the
most frequent are only the unavoidable ties with the subordinates and the bosses while
other contacts are kept at a distance. The general impression that we get from the data
is quite consistent: the managers abhor the possibility of getting stuck with a particular
relationships in order to keep their options open and remain competitive. But this very
strategy of avoidance leaves them resourceless (Garguilo, 1993), so they rush for cover
and support in the arms of their immediate supervisors. They invest heavily in the
cooptation of their direct bosses. In particular, they tend to expand the contents of their
exchange making the tie highly multiplex. However, the attempt to embed the relationship
in a general pattern of patronage is doomed to fail, since their would be patrons, i.e.
their direct bosses are not interested. They themselves face a similar situation to which
they respond by building the dependency relationship with their own bosses. The result
is a system in which everyone is obsessed by nurturing complex relationship with his/
her supervisor in a hope to trade dependency for patronage. But those who are targeted
by this strategy tend to refuse to play the role since they themselves need to protect
their positions against their lateral competitors by trying to coopt their own bosses. In
this hopeless endeavor the matrix management proves its only strength: unreciprocated
dependency and the lack of patronage keep managers on alert, keenly aware that they
need to network even harder in order to survive. This is what probably creates an
impression among casual visitors of matrix organizations that these organizations are
more dynamic and active than any others. It makes them to cheer the entrepreneurial
spirit and creative confusion they think they see while they are in fact witnessing a
futile search of middle managers for save haven in the arms of their direct supervisors.
7. Conclusion: the future of network organization
What lessons can be drawn from the performance of matrix organizations for network
organizations? We argue that matrix and network organizations lead to similar
consequences because they both seek to increase organizational flexibility by means of
loosening the rules in the formal structure, by creating positional uncertainty and by
relying on informal relations for allocation of resources. This leads to structural
43Druæboslovne razprave, XIX (2003), 42: 21-46
Interpersonal dynamics in network organizations
similarities between matrix and network organizations in two points. First, network
organizations are subject to the same logic of interpersonal dynamics in spite of the fact
that they attempt to achieve integration by means of informal social processes. If
anything, the lack of emphasis on formal structures enhances rather than moderates the
problems of positional uncertainty in a network organization. Second, like matrix
organizations, network organizations attempt to gain flexibility by inserting uncertainty
through marketization of internal relations which erodes social solidarity. The result is
the loss of commitment on the side of its members and their reluctance to maintain ties
and develop them into powerful means of problem solving and cooperation.
It seems that the central promise of network organization namely, that organization-
wide integration can be achieved by means of loosening of the formal structures, remains
largely unfulfilled. The substitution of hierarchy with market governance erodes the
traditional basis for the formation of stable social ties and resulting social structures.
Since network organizations are de-emphasizing the role of formal structures in search
of greater flexibility they expose themselves to the same problems that have been noted
in matrix organizations. While the search for flexible organization remains a worthwhile
objective there are no simple answers to the problem. Simply doing away with the
elements of hierarchy embedded in the organizational structure creates severe problems
for the functioning of organizations. The solution should be sought in a balancing act
between rigidity of bureaucracy and spontaneity of social networks. Neglecting one
can lead to either suffocating rigidity or intolerable flexibility.
Acknowledgements
This article is a based on a paper presented at the European Academy of Management annual
meeting in Stockholm (May 9-11, 2002). I would like to thank Ron Burt for making his
dataset available for empirical part of the paper. I would also like to thank him, Martin Gargiulo,
Ronan van Rossem, and Anton Kramberger for the comments and suggestions on the earlier
versions of this paper.
Notes
1.  The development of organizational theory has mirrored these changes giving increasingly
more emphasis to the role of environmental forces in shaping and determining organizational
structure and success. Thompson’s (1967) conception of the environment as an object which
can be successfully mastered by boundary spanning activities while the technical core can be
left intact has been superseded by the notion of external control of organizations (Pfeffer,
Salancik, 1978). While the institutional theory theorized that organizations have to give in to
the assailing environment which makes them accept various organizational forms (DiMaggio,
Powell,1983) it saw decoupling as a strategy by means of which an organization can still
outwit its environment (Mayer, Rowan, 1977). With the population ecology’s argument on
structural inertia (Hannan, Freeman, 1984) the last pieces of adaptive strength of organiza-
tions were lost to the overpowering environmental selection (Hannan, Freeman, 1989).
2. The fact that there is only one subordinate in a typical network is a result of the way the
question was asked. In order to keep the size of the networks under control the managers
were asked to name only one, the most promising and successful subordinate.
44 Druæboslovne razprave, XIX (2003), 42: 21-46
Andrej Rus
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Author’s address:
dr. Andrej Rus,
Faculty of Social Sciences
P.O. Box 2547
SI-1000 Ljubljana, Slovenia
email: andrej.rus@guest.arnes.si
Prejeto in odobreno za objavo v angleπËini aprila 2003.
Po mnenju uredniπtva je prispevek uvrπËen kot izvirni
 znanstveni Ëlanek (s kvantitativno argumentacijo).